Hazelwood Power Station

Hazelwood Power Station is a 1,675 megawatt brown coal-fired power station in the Latrobe Valley in Victoria, Australia. (The company lists the net capacity of the power station as being 1,541 megawatts). The power station and associated mine is located approximately 150 kilometres east of Melbourne and covers 3554 hectares. International Power Australia, a subsidiary of the UK headquartered International Power, has a 92% interest in the power station. Approximately 50% of the power from the station is covered under a power purchase agreement until 2016. Coal for the power station originates from the Hazelwood Mine, which produces around 18 million tonnes of brown coal a year.

The Hazelwood Power Station was listed by The Climate Group as being the second largest power station emitter of carbon pollution in Australia in 2009 both by total volume and emissions intensity. (The larger capacity Loy Yang A Power Station was the largest polluter by volume. The Playford B Power Station in South Australia was only marginally greater polluter in the emissions intensity ranking with 1.38 tonnes of carbon dioxide per megawatt hour compared to Hazelwood's 1.37.

The Climate Group estimated that in 2009 the Hazelwood power station emitted 16.25 million tonnes of carbon dioxide equivalent (Mt CO2e). The age and emissions profile of the plant have led to calls for the power station to be closed. (See Proposals to close Hazelwood section below). In an opinion column, David Karoly, a professor in the school of earth sciences at Melbourne University, estimated that since the Hazelwood power station began operating in 1971 it has emitted approximately 600 million tonnes of carbon dioxide and would contribute a further 320 million tonnes prior to its currently scheduled closure date of 2031. Karoly estimated that this one power station "will contribute 0.01 per cent of total global emissions from 1970 to 2100. Given the direct link from emissions of greenhouse gases to climate change and sea level rise, the emissions from Hazelwood can be pinpointed as a partial contributor to future sea level rise. Since the rise is conservatively expected to affect 100 million people by 2100, Hazelwood's 0.01 per cent contribution will cause the annual flooding of more than 10,000 people somewhere in the world."

History
The development of the brown coal reserves at Morwell were started by the State Electricity Commission of Victoria (SECV) in 1949 as the 'Morwell Project', which included the Morwell open cut mine, and the Energy Brix Power Station.

Hazelwood Power Station was approved in 1959, and was to consist of six 200 megawatt generating units, giving a total of 1,200 MW of generating capacity. The first unit was to enter service in 1964, and the sixth in 1971. Growing electricity demand saw a review carried out by the SECV in 1963, with commissioning of the generating units moved forward to 1969. Additional capacity was provided when in 1965 two 200 megawatt additional generating units at Hazelwood were approved, to be commissioned in 1970 and 1971 respectively.

In August 1996 the Hazelwood power station and the associated mine were sold to International Power as a part of the privatisation of the SECV by the Liberal Party government of Jeff Kennett.

Proposals to close Hazelwood
At the time of privatisiation the plant was approaching the notional end of its life, which was slated for 2005. However, the new owners wanted to extend its life. In 2004 the Labor government led by Steve Bracks decided to extend the life of the project until 2031 despite a campaign by environmental groups.

In September 2008 International Power itself flagged that the Hazelwood plant could be shut down, subject to the negotiation of adequate compensation. In a submission on the federal government's then Carbon Pollutional Reduction Scheme (CPRS), International Power Australia's Executive Director Tony Concannon stated that the company supported measures which would result in the closure of the most polluting power stations on the provision that they "are compensated for the full loss of asset value." The company estimated that the pre-CPRS asset value of both the Hazelwood and Loy Yang B power stations was "over $4 billion".

One option flagged by International Power Australia was "that the Government target the largest emitters and agree with the owners an emissions reduction production profile based on a phased withdrawal over a fixed number of years, in return for a tariff derived from the pre-CPRS market value." This option, it argued, would allow "the Federal Government to achieve deep, cost-effective reductions in greenhouse emissions early in the life of the CPRS. An agreement of this type which included, say, two brown and one black coal power stations would enable a prompt and controlled reduction in greenhouse gas emissions from the stationary energy sector of more than 20 per cent. From a brown coal perspective, IPRA estimates this could be achieved for less than $10/tonne CO2e." (In its submission International Power Australia also stated that it supported the submissions of the Energy Supply Association of Australia, the National Generator Forum (NGF), the Energy Retailers Association of Australia and the Energy Networks Association.)

In May 2010 a report by Green Energy Markets, which was commissioned by Environment Victoria, assessed two options for closing Hazelwood and meeting its contribution to the grid. The scenarios were for supply side solutions only (gas fired electricity generation capacity and renewables) and a mix of supply side options with demand management/energy efficiency strategies. The report concluded that, based on proposed supply side solutiions that already had planning approval or were proposed, it was achievable to replace Hazelwood. "This is equivalent to reducing Victoria’s emissions by 11-12 per cent by 2013, and amounts to total emission reductions of more than 116 million tonnes over the eight year period from 2013 to 2020," the report stated.

While the consultants did not model the detailed economic costs of replacing Hazelwood, they noted that "based on public statements made by International Power we have used $20 per tonne carbon value to estimate the cost of replacing Hazelwood. Given Hazelwood’s annual emissions of 16 million tonnes of CO2 each year this amounts to a carbon value of $320 million per year. An amount of this order should be sufficient to cover both the cost of any compensation to International Power to close Hazelwood and the cost of bringing forward clean energy investment. If this cost was recovered from electricity consumers then electricity prices would rise by $6 per MWh and an average household’s electricity bill would increase by around $36 per annum. This is equivalent to one fifth of the Federal Government’s modelled cost impact of the CPRS under the 5 to 10 per cent emissions reductions targets by 2020."

Labor commits to negotiating closing two units in return for compensation ...
Subsequently, the Labor government proposed that it would enter into negotiations with International Power Australia and other generators over ways to retire brown coal fired power station capacity. In a media release accompanying the release of Taking Action for Victoria's Future, the government's Climate Change White Paper, Premier John Brumby stated that "the most cost-effective way to clean up our environment and achieve this reduction in greenhouse gas over the next four years is to close two of the eight units at Hazelwood Power Station." In a speech during the 2010 Victorian state election campaign Brumby stated that his government would bring forward "the staged closure of Hazelwood Power Station" and replace it by "harnessing solar, wind and other renewables – to make our State the solar capital of Australia." The Greens on the other hand, opposed compensating power generators preferring the use of regulatory mechanisms to impose carbon pollution reductions. (See 2010 Victorian election and coal for more details).

... but the Liberal government reneges
In its 2010 annual report, released in mid-April 2011, International Power revealed theat the Bailleau government had abandoned negotiations over the closure of the station. In its report the company stated that "in Victoria, where our Hazelwood and Loy Yang B plants are located, the former government introduced legislation designed to achieve a 20% reduction in CO2 emissions by 2020. However, the new Conservative (Liberal) state government, which was elected in late 2010, has ended negotiations regarding the closure of selected brown coal plants over a defined timescale, in a manner that compensates owners for the full economic value, and has not yet outlined alternative policies as to how it will address the reduction target. We will continue to engage with the new government on policy developments."

Just prior to International Power's annual general meeting and on the day of the federal government budget, the Victorian government confirmed that it had abandoned negotiations over the closure of the power station. Michael O'Brien, the Minister for Energy and Resources, defended the decision on thr grounds that it would have a cost impact on Victorians and that "without an operational replacement for the electricity generation from these units, the power would likely have come from electricity imported from other states and generated from black coal – a poor outcome for Victorians and the environment." O'Brien stated that the government was "delivering on its commitments" to shift to a lower emissions economy by providing "an additional $41 million for the Energy Technology Innovation Strategy (ETIS)" over its three-year term and "promoting the development of carbon capture and storage in Victoria, including with $30 million for the CarbonNet project."

Power station
International Power Australia states that the power station employs "around 500 staff, with 300 alliance contractors" and "supplies up to 25 per cent of Victoria’s electricity needs- some eight per cent of the National Electicity Market." The company also states that it "seeks to utilise its by-products, such as kaolin (china clay) processing for the ceramic industry and its mineral ash for soil conditioning."

It states on its website that "in recent years, the power station and mine have won a series of awards and commendations for its workplace and environmental performance. In 2005 the Hazelwood business received an Australian Greenhouse Office Large Business Award for Outstanding Achievement in Greenhouse Gas Abatement."

A review of the Victorian power grid in 2000 noted that the station uses water from an artificial impoundment referred to as Hazelwood pondage and that the power station achieved "sent out thermal efficiency of 26%."

Pollution
In November 2009 Environment Victoria released International Power's 2009 "Statement of Compliance" in which the company revealed that it had breached four of the twenty-two conditions of its Environment Protection Authority licence. The group also reported that the company had breached its licence conditions in 2007 and 2008. The breaches, Environment Victoria stated, "relate to water quality in discharges from the plant’s cooling pond to the Morwell River; dust and particulate levels. The reports also outline that environmental targets relating to gaseous emissions from the smokestacks, including carbon monoxide, sulphur dioxide and sulphur trioxide were also exceeded."

In a media release Environment Victoria’s Campaigns Director Mark Wakeham stated that "on several occasions when the plant exceeded its licence limits, the EPA granted the company an emergency approval to pollute, protecting International Power from prosecution under environmental laws."

In a review of the documents for Environment Victoria, the Environmental Defenders Office reported that "it appears that total gaseous emissions from Hazelwood Power Station are not measured. Rather, emissions from one stack at a time are measured, and this only occurs once every six months. Therefore, based on the annual reports submitted to the EPA which we have been provided, it appears there is limited information on the emissions of CO, NOx and SO2 and on whether Hazelwood Power Station has complied with the limits on the discharge of these gases."

Carbon Reduction Review and options
In June 2007, International Power's Andrew Sinclair outlined the company's carbon emissions reduction strategies to the annual meeting of the Coal Research Forum in the UK. Sinclair stated that the company's "Carbon Reduction Review" identified the key strategies as including major changes at the Hazelwood power station.

Sinclair noted that the power station was the oldest of the Latrobe Valley baseload power stations with the first 200MW unit commissioned in 1964 and that its greenhouse gas intensity was 1.549 tonnes of carbon dioxide equivalents per MWh sent out. Sinclair described the station as comprising "small, relatively inefficient, units (200MWE, 28% cycle efficiency LHV basis), requiring significant ongoing investment" and that there was a legislated requirement for new plants to emit no more than .8 tonnes of co2equivelent sent out. He also noted that "current clean coal technologies such as IGCC" are "not commercially proven for low-ranked coals (61-68% water total moisture content)".

He also noted that as part of the "Hazelwood 2030" plant, the company aimed to reduce the greenhouse intensity of Unit 1 to approximately 1.20 tonnes per tonne of carbon dioxide equivalent per MWh sent out by retrofitting coal drying to the unit, increasing the cycle efficiency and obtaining an additional 15 MW of output from technical tweaks such as"improved condenser performance, reduced fouling and increasing fan margin". The company also planned on reducing the greenhouse intensity of Unit 2 by 15%, increasing cycle efficiency by 4.5% and increasing its output by 20 MW.

He also noted that "preparation for new baseload plant to commence in 2009/2010 (permitting, consortium & technology selection)". Slides included in his presentation flagged the development of three ultra super critical 800MW units with the first notionally being commissioned in 2016 and the second and third being commissioned in 2022 and 2028. The slide notes that "stages I & 2" of the existing plant "to potentially be decommissioned" in 2010 "depending on market, plant performance and life-cycle status". The new power stations, Sinclair stated, would enable emissions reductions of approximately 11 million tonnes per annum to be achieved if the new plants were commissioned and brown coal pre-drying was adopted by all Latrobe Valley power generators. Sinclair claimed that emissions cuts of a little over 24 million tonnes of carbon dioxide equivalents a year could be achieved with both new power units and carbon capture and storage storing 50% of the emissions by 2015-2017 and 80% by 2022 to 2026.

Submission on CCS regulation
In a submission to the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 submitted by International Power Australia's Regulatory Policy Manager, Patrick Gibbons, the company argued that Carbon Capture and Storage "will be critical to the long term future of the Latrobe Valley's brown coal based electricity production in a carbon constrained world provided the design of the emissions trading scheme is conducive to its development."

The company also cautioned that "depending on the details of the emission trajectory and the pace at which the new emission charge is introduced, it could cause a retreat from brown coal being used as a main fuel source." The alternative, it warned, would be the use of gas which it claimed there was a "finite supply" of "in the South East".

While stating that "the Bill is likely to provide a template for similar legislation by the states and territories for onshore storage International Power Australia complained that it preferenced "treatment for existing holders of petroleum rights" over "storage prospectors and potential injection licence holders. The company noted that, if existing exploration licence holders had "veto" rights over carbon storage exploration, this would affect approximately 80% of the Gippsland Basin.

Hyping a tiny CCS trial
In 2006 IPRA stated that the 'Hazelwood 2030' demonstration cost was estimated "at $369 million, with $289 million contributed by Hazelwood". The company stated that it would "receive $80 million in Federal ($50 million) and Victorian ($30 million) Government funding to develop an innovative retro-fit low emission technology project" at the power station. (The funding came from the Federal Government’s Low Emission Technology Demonstration Fund and the Victorian Government’s Energy Technology Innovation Strategy.

While the project sounded large, the major component of it was the installation of a coal-drying process on the oldest 200 megawatt generation unit which the company claimed would "reduce greenhouse gas emissions by an estimated 30 per cent." It also claimed that the CCS project "is expected to be operational by early 2008." The company boasted that the Latrobe Valley has "more than 500 years of brown coal reserves" and that the government funding would enable the ongoing exploitation of them.

A mid-2009 IPRA media release stated that the cost of the CCS project was just $10 million.

In its 2009 Annual Report International Power stated that the pilot CCS plant, which was commissioned in mid-2009 "is successfully capturing up to 25 tonnes of CO2 per day from the flue gas." The company states that "the CO2 is removed from the flue gas and will be sequestered by mixing it with ash water to form calcium carbonate (chalk), which has numerous potential uses from building materials to adhesives.

The company states that the CCS project would apply to just "one of the power station’s generating units" and that it could only be expanded to "eventually capture up to 50 tonnes a day".

Despite the hype about the Hazelwood CCS project, it is miniscule compared to the power stations emissions. The proposed capture of 25 tonnes per day would represent 9,125 tonnes in a year, representing just 0.056% of the plants annual carbon dioxide emissions of 16.25 million tonnes.

The company also stated that the pilot plant "will be regularly reviewed and assessed for its potential for larger scale research programs." However, the media release cited International Power Australia's Executive Director, Tony Concannon as stating that "it will be some time before IPRA is in a position to determine if this technology is suitable to be rolled-out to other Hazelwood generating units or, indeed, other fossil fuel fired power stations." The trial plant was designed and built by Process Group with "technology support" from the Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC).

The CCS trial that faded away
In 2006 The Age reported that it was planned to establish a trial carbon dioxide to biofuels plant at the Hazelwood Power Station. It was reported that the proposal by Energetix, a division of the Victor Smorgon Group, would "cover about 60 metres by 10 metres and will sequester only a small amount of carbon." If the trial went well, the newspaper reported, the expansion of the project to use approximately 1,000 hectares of land "could allow the sequestration of about 5 per cent of Hazelwood's 17 million tonnes of annual carbon dioxide emissions." Energetix is now a part of the Smorgon Group's subsidiary, Biomax Fuels. On its website, the company states that it "has the technology to recycle CO2 emissions to produce biofuels through the photosynthesis process with micro-algae" but does not mention any ongoing trials at the Hazelwood power station.

Financing
International Power bought the formerly government-owned power station in 1996 for $2.35 billion.

In its 2009 Annual Report, International Power states that "for 2010, we have forward contracted 50% of our expected output (load factor 80%) at Hazelwood and expect to achieve an average price of A$43/MWh. In October, we completed a A$425 million project refinancing for the 687km SEA Gas pipeline. The new facility will run until October 2012, and fully replaced the existing debt, which was due to mature in December 2009. In January 2010, the total existing nonrecourse debt of A$742 million of Hazelwood power station was restructured. The previous two-tranche structure (comprising A$445 million Tranche B, which was due to mature in February 2010, and A$297 million Tranche A due to mature in 2014) was merged into a single facility with a maturity date of 30 June 2012 and a margin of 400 basis points."

At its 2010 annual general meeting the Commonwealth Bank -- which has a 2 per cent direct stake and its subsidiary -- has written down the value of its interest in the project to $1 million. It is understood that the company paid approximately $25 million for its share of the company in 1996. In response to a question from Greenpeace's campaigner, John Hepburn, the Commonwealth Bank's chairman, David Turner, stated "the Hazelwood power station probably wasn't the best investment the bank made. It's been written down to a million dollars. And it's certainly not part of our core strategy and we wouldn't plan to repeat an investment like the one we made in Hazelwood."

Environment Victoria Campaigns Director, Mark Wakeham, told ABC's PM program that the revelation "suggests that past claims for compensation have been wildly exaggerated. And in fact it would be much cheaper than anticipated to replace all of the power station ... clearly the Commonwealth Bank can see the writing on the wall. They can see that the power station has a very limited future and they're also not anticipating much in the way of compensation."

The Age reported that a Commonwealth Bank spokesman had written down its investment due a a reassessment of its market value. International Power, the Age reported, "is believed to put its book value at about $2 billion." The Commonwealth's subsidiary, Colonial First State, has an indirect share of 6 per cent on behalf of a number of super funds but that it has not changed its valuation of its interest.

International Power's corporate affairs manager Jim Kouts downplayed the impact of the Commonwealth Bank's decision. "In effect, we're talking about an internal accounting treatment of the bank's investment and in our view there is currently no trigger for this impairment," he said. In a media statement International Power declined to disclose what value it put on its 91.2% interest in the plant. stating that it was "commercially sensitive and confidential information."

Bruce Mountain from Carbon Market Economics, a carbon advisory company, told ABC News that the Commonwealth's valuation was significant. "What the current valuation is showing is that the expected future profits for the power station are likely to be low," he said. "Those expected future profits will be from the continued operation of the power station as well as any compensation payments the power station might receive from the government. It's clear that by indication of that, they're not expecting sizeable payments from the government for the closure of the plant."

Australian emissions trading scheme
In its 2009 Annual Report, International Power states that the proposed Carbon Pollution Reduction Scheme would have limited effect on the company for the forseeable future. It stated that "The government’s targets are a minimum 5% reduction in CO2 emissions (against 2000 levels) by 2020, with the potential for this target to change to 25%, pending a global agreement to cut CO2 emissions. The legislation proposed that the scheme would be introduced from July 2011 with a period of ten years where, in effect, no charge will be applied for a portion of emissions from coal-fired power plants, and our Hazelwood and Loy Yang B plants would be eligible for this relief. The scheme also included a fixed price for carbon, of A$10/tonne, for the first year of the scheme." Subsequent to the release of the annual report the Australian government shelved its emissions trading scheme.

November 6, 2008: Activists shut down Hazelwood power station
On November 6, 2008, a group of activists walked onto the site of the Hazelwood Power Station, one of the most inefficient power stations in the industrialised world, to protest Australian inaction on climate change. Two people stopped and chained themselves to the conveyor belts which carry coal to the power station. The station was due to be decommissioned in 2009 but is undergoing rapid expansion to 2009. . The group posted an explanation of their action, information about the plant, and justification for direct action on a purpose-built blog.

July 2009
At an Earth Hour protest against the Hazelwood power station Victoria police arrested three protestors and charged them with trespass, obstruction and breach of the peace. Just days before the case was scheduled to be heard, police dropped the charges.

September 13, 2009
Approximately 500 people protested outside the power station against the plant's ongoing operation. Victoria Police arrested 22 people for trespass after they climbed on or over the perimeter fence.

October 10, 2010
Approximately 150 people from the Switch Off Hazelwood Collective erected a mock solar tower outside the Hazelwood power station. "There's a lot of momentum around getting this dinosaur closed down permanently," said Ellen Roberts. "We're calling on Premier Brumby to close all of Hazelwood within the next term of office and replace it with clean renewable energy." In a media statement IPRA’s Group Manager for Corporate Affairs, Mr Jim Kouts sought to ridicule the protest claiming that the "low key, sparsely attended protest suggests that Victorians are more interested in a sensible and mature debate about the transition to a low carbon future than the cheap slogans and simplistic arguments that tend to be bandied around by extremist groups."

November 6, 2010
A "Rally to Replace All of Hazelwood" attracted approximately 5,000 people in Melbourne. Professor David Karoly told the crowd that "replacing all of Hazelwood would be an important symbol to Australia and the world that we are prepared to take action to clean up our energy supply. But it would be more than a symbol. It would also reduce future climate change and reduce the numbers of people impacted by flooding resulting from sea level rise."

In a media release Environment Victoria Campaigns Director Mark Wakeham said that "over the past 12 months Hazelwood has become the major environment issue of the state election. We’ve seen some policy movement from the ALP and the Greens, but now, 3 weeks out from the election, we need a clear plan from all political parties to commit to replace all of Hazelwood, Australia’s dirtiest power station. "So far, The Greens have promised to replace all of Hazelwood within four years, while the Labor Party has released a plan to close the equivalent of one-quarter of Hazelwood by 2014. The Coalition however has been almost silent on the issue and it’s not at all clear where they stand."

Ellen Roberts, from Climate Action Moreland, a local climate community group, described Hazelwood as a "polluting old dinosaur" which "spews millions of tonnes of CO2 into the atmosphere every year, and the community has had enough. Victorians want leadership on Hazelwood and climate change. Whichever party can deliver a clear plan to replace all of Hazelwood and move Victoria to a renewable energy powered future will have a strong story to tell on climate change. We need an urgent shift away from coal, and a just transition for coal workers through investing in new industries for Gippsland such as a renewable energy manufacturing hub," she said.

Lobby group affiliations of International Power Australia and its subsidiaries

 * Business Council of Australia
 * Minerals Council of Australia
 * National Generators Forum, member. (International Power Australia's Executive Director, Tony Concannon, is a leading member of the forum.
 * Energy Supply Association of Australia

Plant Data

 * Owner/Parent Company: International Power Australia (91.9%) and the Commonwealth Bank of Australia (8.1%).
 * Plant Nameplate Capacity:1,675 megawatts
 * Units and In-Service Dates:
 * Location: Latrobe Valley in Victoria
 * Coal Consumption:18 million tonnes of brown coal
 * Coal Source:Hazelwood mine
 * Number of Employees: approximately 500 staff and 300 contractors.

National Pollutant Inventory Data
The Australian's Government's National Pollutant Inventory lists emissions from the Hazelwood power station for 2008/2009 as being:

Contact details
Hazelwood Power Station PO Box 195 Brodribb Road Morwell Victoria 3840 Australia Tel: +61 (0)3 5135 5000

Related SourceWatch Articles

 * Researching coal in Victoria
 * State Electricity Commission of Victoria
 * Victoria and coal
 * 2010 Victorian election and coal


 * Australia and coal
 * Earth Liberation Front Letter to International Power Australia CEO, Graeme York
 * Graeme York
 * New South Wales and coal
 * Queensland and coal

National Pollutant Inventory

 * National Pollutant Inventory, "2008/2009 report for NATIONAL POWER AUST INVESTMENTS LTD, International Power Hazelwood - Morwell, VIC", Department of Environment, Water, Heritage and the Arts, March 2010. (Data is also available from this link for each year from 1999/2000.

Environment Victoria archive on Hazelwood

 * Environment Victoria Replace Hazelwood Archive, accessed November 2010.

International Power Australia submissions

 * International Power Australia, Submission to the House of Representatives Standing Committee on Primary Industries and Resources Inquiry into the Draft Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill, House of Representatives, July 16, 2008.

Key International Power Australia media releases

 * International Power Australia, "Final Approval Granted for West Field", Media Release, October 4, 2006.
 * International Power Australia, "Clean coal Project Awarded Funding", Media Release, October 25, 2006.
 * International Power Australia, "Response to Victorian Government White Paper", Media Release, July 26, 2010. (The contact on this media release is Trevor Rowe.)

International Power presentations

 * Andrew Sinclair, "International Power's CCS Initiatives", Presentation to the Coal Research Forum, Rugeley Power Station,, June 20, 2007.

Other resources

 * Green Energy Markets, Fast-tracking Victoria’s clean energy future to replace Hazelwood Power Station, Environment Victoria, May 2010.
 * Climate Action Moreland, "Hazelwood power station – A brief history", Climate Action Moreland website, June 15, 2010.